WASHINGTON, DC
(January 23) –
Cash buyers, many of them investors, are putting downward pressure on
home prices, according to the latest Campbell/Inside Mortgage Finance
HousingPulse Tracking Survey.

In December
2011 the overall proportion of cash buyers in the housing market surged
to a record 33.2%, up from 29.6% a year earlier. But among investor
homebuyers, the proportion of cash buyers was much higher. A huge 74% of
investors used all cash to buy homes last month.

The
HousingPulse survey also found that cash buyers are able to bid
significantly lower - and successfully - on many properties because they
offer a shorter and more reliable closing timeline. This is particularly
true for bids on distressed properties, because mortgage servicers
selling foreclosed properties or real estate owned generally prefer
transactions that can settle within 30 days.

The total
share of distressed properties in the housing market in December, as
represented by the HousingPulse Distressed Property Index (DPI),
continued at a high level of 47.2%, using a three month moving average.
This is the 24th month in a row that the DPI has been above 40%.

Investors accounted for 22.8% of home purchases in December 2011, up
from 22.2% a month earlier. But despite their relatively small share
among homebuyers, investors have an outsize effect on home prices
because their bids bring down market prices.

While
investor bids may not be the first offers accepted, they often end up
winning properties after other homebuyers are eliminated because of
mortgage approval or timeline problems. Appraisals below the contracted
price are a common reason for mortgage denials. Most mortgage financing
timelines are now in excess of 30 days.

Real estate
agents responding to the survey commented on low bids from investors.
“Investors
usually offer 10%-20% below list up to a price of $250K. First time
homebuyers are (offering) close to list (price) as are current
homeowners. Investors want 2-4 weeks to close...Financing buyers end up
with 6- 8 weeks plus to close,”
reported an agent in Arizona.

"Investors
are very aggressive and expect to see 15%-20% off list, they will close
in 30 days or less and most are cash buyers. First time homebuyers are
in a market that sometimes sell for over list price which is difficult
‘at
first’
for them to understand,”
reinforced another agent in California.

“In
competitive offer situations, cash offers prevail for the most part
because of the common knowledge of lender closing issues. Cash sales
close in 21-30 days. FHA sales close in 45 to 60 days," reported an
agent in New Jersey.